Effective Annual Interest Rate
– EFFECT
The effective annual interest rate can be calculated using Excel’s EFFECT function. See
the table below for a detailed list of the exercises and problems in the text that can
be solved using this function.
This function is included in the Analysis ToolPak.
Syntax
=EFFECT(nominal rate, number of compounding periods per year)
General Example
The following general example shows how the EFFECT function can be used. Notice
that the EFFECT function appears in the formula bar.
1
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View Full DocumentUsing the EFFECT Function in a Spreadsheet
To calculate the effective annual interest rate, create a spreadsheet by following Steps 1
to 7. Or, to use the EFFECT function right away, open the EFFECT worksheet in the
Excel Functions Templates workbook. All fields have been formatted for you (currency,
percentage, number of decimals displayed).
Step 1
: Enter
EFFECT Function
in cell A1. You will replace
EFFECT Function
with
your project title when you use your spreadsheet for a particular question or
situation.
Step 2
: In cell A3 enter
Nominal Annual Interest Rate
.
In cell A4 enter
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 Fall '05
 TonyCirusolo
 Math, Interest, Nominal Interest Rate, annual interest rate, effect function, Npery field

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